Mike, i respectfully disagree with you. I own the minerals and NOT EOG so it s not free money. I trading precious resources for my 20 percent. My mistake was not fully understanding the contract or doing my due diligence but in no way is this free money. ey.
Marcus:
Very well said. Hang in there!
Marcus McBride said:
Mike, i respectfully disagree with you. I own the minerals and NOT EOG so it s not free money. I trading precious resources for my 20 percent. My mistake was not fully understanding the contract or doing my due diligence but in no way is this free money. ey.
Mike,
You must be on the side of a oil company. And I will agree with you on a few points, but I am the owner of minerals as well as surface on some of my property. I also am an investor and have been on the oil company side of it also. I don't see any oil company in a small building or not having big parties. They waste so much money in management that they could qualified as a government agent. But, I have seen some farmers and land/mineral owner doing without nice places while the oil company took advantage of them.
Now regarding flaring the gas. If an oil company wasn't so greedy, they would make sure a pipeline were in place before they did a lot of drilling in a sweet area. Also, all gas can't be compressed unless it liquid, dry gas just don't make it. Since oil companies make .8125 or 13/16 it's not like they aren't getting their part.
On drilling today, with all the resources we have, you hardly ever drill a dry well. If you do, you need to replace some of the top pay workers. Most of the top companies CEO make more in one month than people who own all the minerals per section will get in a lifetime. So, please don't feel sorry for the oil company.
If you are lucky enough to get mineral today with the surface, you are paying a min. of $1500 + per A if there is any drilling within the county, so how is that free money. Plus you have lost at least 5 A or more for the well site. Oh yes, I have lost enough money on investments to write a book, but I have also done real good. You see, I grow up on a farm, drove a tractor when I was 12 years old and understand what it is to buy land and work hard. I even helped the cows calf in the middle of the night. Now, I would like to know how many of these so call starving oil people grow up like that. I sure don't know any of the CEO or top manager who did. Most can't even get there hands dirty or wash their own car. I live by a lot of them, so I see what they do.
Now the people who work on the rigs and field are a different story, they are hard worker, making little money for as hard as they work. So, when oil companies take advantage of land owners/mineral owners it makes me mad. Their are a few good oil companies and some good land men that are fair. But most are like a snake in the grass. We also need to get a new IT dept. at Continental Resources as they can't write software programs, plus they are the slowest paying company I have deal with yet, so watch out.
Marcus, I meant what I said that comparatively I thought you were doing great. If you were leased to Chesapeake you might have even more deductions plus have your production sold to an affiliate for half price. I think EOG will take the better part of the deal but EOG still has a reputation worth protecting and intend to stay in business and are less inclined to treat mineral owners in a raw manner while Chesapeake hasn't known whether half of the company was going to have to be sold off or not for the past few years, they have been in jeopardy and trying to squeeze blood out of anything that produces, even if it was contrary to the contract because they need the money now and a lawsuit will be in the future, if anyone can afford it. In your place I would be glad to at least be leased to a generally well respected company. I agree with Mike in theory that a well established operator can add value to the deal that they might get a better price for the production, but they do not always do so, so it's a hard to quantify possible benefit. Marcus, your position may not be ideal, but I think it is far from as bad as it could be.
I have heard that if an exclusion to the enhancement clause is put into a lease, the companies reject it and it is very hard to get them to agree to that.
Virginia, are you an attorney, I think I read that somewhere -
Ms. Nolen, at risk of you saying I should be slapped off the forum again, I am going to say that different people have different leasing experiences, because they know the value of their property, the lessee knows that they know and the potential lessor brings everything or most everything on the table and doesn't give away gimme items. I think if you cede everything else but royalty, bonus and royalty free of deduction clause, of course you can't get the no deducts clause because you already gave up everything you had to negotiate with. I also believe that if you just negotiate with the landman, you may well not have been negotiating as hard as you could. I have had landmen pass me to the VP of land for the company and the VP of land pass me to the CEO of the oil company with whom I had several talks, before I turned him down. I knew the value of my minerals, I had already found someone else who wanted to lease my minerals, I was drillsite/wellbore tract and need not lease my minerals at all. Had I not been drillsite tract, had I not already had someone else competing to lease my minerals and had I not known what the minerals were truly worth, I probably would not have got past the landman who said "sorry it's only worth xxxx and that's the deal". I had other forms of leverage also in another tract that the company wanted to lease and of course they had hopes that if they could lease me that my brother would lease to them also. I would also suggest that you negotiate everything else first and then royalty and bonus if you were rreally wanting something else in your favor. I wonder if the people who are not getting the no deducts clauses ceded surface use, pipeline easment, length of continuing operations clause, form of the shut in clause, depth severance and pugh clauses. If you do your homework, put in legwork and don't be in a hurry and use all you have, you might get more than just the bonus and royalty you were after. I'll let you in on a little secret I learned, the landman is only authorized to give you so much and it's his job to give you even less than that but the landmans limit isn't necessarily as much as the company will pay to obtain minerals. If they find it easy to say no to any of your requests, maybe it's because you made it easy. Ms. Nolen, operators need to lease minerals to make money, if someone else were to lease your minerals and participate the operator might get a slightly cheaper well but that is not what they are after, the operator wants to profit from your acres. If some blockbuster comes in and leases and participates in your well the operator makes little to nothing off your acres. If someone does chip your acres out of the operators block the operator could conceivably pay your lessee for the lease to be assigned to the operator for cash and a small override, but that isn't optimal for the operator either, having to deal for your acres with another professional who might be fine either way with a quick profit and a small override or participating. There may be an example of somewhere where there is literally nothing to trade but if you put in the work, I think that something can generally be found. We don't always get what we want but then too I think most people didn't put their utmost effort into it. I know I didn't when first involved in oil and gas. I really believe that hiring a professional to negotiate for you could make you money, but there are some out there that will just take your money and you get the lease you would have got anyway. If a lawyer hands you back the company lease you asked him to check and he doesn't suggest any changes because something was greatly against your best interests, you wasted your money.
I am in indeed in the oil business and am always astounded at how angry people become when I simply offer a different perspective to think about. Ms. Pflum, I actually learned to dig ditches in the oilfield before I could spell; at 61 I do my own engineering, roughnecking, plumbing, backhoe work and am the CEO, chief bottlewasher and cook. My employees have worked with me 35 years; we drive pickup trucks, not jets, and don't party too hardy as we are mostly wore out all the time. Your judgment of oil men and oil companies is rooted in anger, little else.
I am also a mineral owner. I came by my minerals thru my father and mother's hard work, or I bought them myself thru my hard work. Having said that, in the big scheme of life I don't own them (they are as old as the earth), I am just renting them. As to the propect of having my tight oil minerals explored and hopefully produced, I cannot afford to do that myself. I would not borrow money at the bank to risk 9 million dollars for 8% annual rates of return. So I need a company with lots of money to help me with all that. If I can get that done I am going to be happy and work with them, in partnership, and not automatically assume they are a bunch of crooks. I will be smarter than they are. If not, my bad. It does not seem unreasonable to me that I should bare some of the costs of getting "my" share of that oil and gas to market, to be sold, that is all I was suggesting.
Having said all that, Mr. Kennedy is absolutely correct, before you sign an oil and gas lease, get some help. Make sure every thing you have learned on these kinds of mineral forums get into your lease. Any Lessee is bound by law to follow the terms of that lease explicitly and in the law suit happy world we live in today I don't think big companies are going to try and steal from you intentionally and worry about lawsuits later. I think if you made some mistakes in an oil and gas lease in the internet oil world we live in today, its just as much your bad as anybodys.
I don't know anything about Chesapeake, or EOG, or Continental, how and why they do what they do. Personally, I think they are all a bunch of dumb asses for agreeing to lease terms that they do, for paying the lease bonuses they have, for borrowing billions of dollars of capex to drill marginal, tight oil shale. I detest the BS they are spoon feeding the American public about energy independence thru the drilling of tight oil resources. It is an outright lie. I don't think this spending spree can last much longer, prices are going down, capex will be drying up. So, my advice is to get your minerals drilled as fast as you can. This shale party is not going to last forever. If those guys will agree to the lease terms you want, stick it to them. Make them pay. They deserve it.
Marcus, I understand that you disagree with me; if you have been wronged I hope that you can get it worked out. Merry Christmas.
Why should big oil worry about law suits? It's like David and Goliath, except David misses.
Marcus:
I wrote a relative long reply to Mike last night; but, evidently the Mineral Rights Forum Police grabbed it before it could be posted or the "Pac Man" ate it. Whatever the case, I'll try to address some if the points our resident Oil Company guru pointed out. First the issue of "Free"! We all know there "ain't" nothing free. Everything comes with a price; but, if a lease is signed in good faith and has a lease clause that comprehensively addresses the "free from expenses" issue, then that’s very clear. As we've talked about previously and many times before, this is a major issue that can only be solved by a massive revolt of the mineral owners.
Now let's talk about the "free" issues again and all these terrible expenses that an oil company or operator has to put into a well to get that "stuff" out of the ground. My land and I would think that most of the mineral owners land and minerals didn't come free. The land (even though in Mike's words, it's rented) came at a pretty high price. Even as a young kid, I always wanted to own some land so I started saving every spare dollar or in some cases pennies at an early age. My choice; but, I never took lavish vacations, hunting and fishing trips, etc. I was happy staying at home and saving dollars so I would be able to buy another piece of land. Over the years, I did buy some land and then I got lucky and inherited some; but, none if it came free. Now an oil company comes along and wants to use my land and make me rich. In the use lease, I give him or her, the opportunity to use my land as long as they adhere to the provisions of the lease. In exchange, the oil company agrees to a number of provisions and if they drill and hit some of that good stuff (oil/gas), they promise to pay me or my family a royalty. Up front, for all their investment, the oil company is given the lions share of the monies received for the products that comes from our land. In today’s environment the oil company will receive 75%-80% of the royalties and the landowner is supposed to get the 25% or 20%. These numbers are variable and it depends on when the lease was signed and where the property is located. Most all old leases that are held by production only pay the mineral owner 1/8th (12 ½ %) and many of the leases that were signed between 2007 and 2009 were 1/6th or 3/16ths. Now they want to be able to take another vacation or wine and dine at the Petroleum Club on us, so they decide we will just factor in some of the expenses.
One last point to make here is that we are told by the oil man that he worked hard, by even digging ditches, etc. and in the process of learning the oil business. Well, does he even think for a minute that we worked hard, maybe even doing some of the same things he did to get the money to live or to buy the land that they are using to get to that “stuff” they are after. Some of us have dug ditches for pipelines and even laid and removed Board roads so the oil equipment could get to and from the drill pad; but, that's not the point. We don't expect to get anything free, we just expect to get our pre agreed fair share.
I believe I can speak for most mineral owners and say that all we are asking for is a fair shake. Do what you say you are going to do and don’t play games.
Marcus McBride said:
Mike, i respectfully disagree with you. I own the minerals and NOT EOG so it s not free money. I trading precious resources for my 20 percent. My mistake was not fully understanding the contract or doing my due diligence but in no way is this free money. ey.
Mr. Bigfoot, I consider it a privlege to own minerals and yes, it is "renting," in my opinion, as the land, and the stuff under it was here millions of years ago and will be millions of years from now. No other land owners in the world have control of the minerals under their land the way we do here in America; if I can benefit, or my family can benefit from the development of those minerals in the short time I am the tennant, I consider myself very, very fortunate. I am sorry you can't seem to grasp that idealism.
You don't like me because I am in the oil business. I got that, believe me, I get it every day. I can handle it, as long as it does not get personal, as you seem to be doing by calling me the "resident oil company guru." I don't consider myself a guru about anything. I did not know this forum was closed to reasonable debate. I seem to be the only dumb ass oil guy anywhere on this forum to step up and offer a different way of looking at things; you don't feel outnumbered, do you? I do not believe I have worked harder that anyone else; I don't know what you do to make a living but whatever it is I would not attack you for it, trust me. I was simply responding to the generalization the lady made that people that run oil companies are crooks, do nothing but party and now, what...wine and dine at the Petroleum Club on...the backs of mineral owners? Good grief.
My suggestion to you sir, is that if you believe that oil companies cannot be trusted in lease negotiations, that you cannot outsmart the nasty buggars, nor can oil companies be trusted to comply with oil and gas law that is as old as Texas is itself, that you are being "used" by having a 9 million dollar well drilled on your place and that 20% of the proceeds for that lease is not fair...you should simply drill your own well. With your own money. You'll own 100% of everything, it tis the perfect solution for you. There are no dry holes being drilled anymore, as the lady said, every well is a money making machine, its easy, really.
Mike:
Let me say up front that I never said that I didn't like you or don't like all oil companies. In fact, I've told you on a number of occasions that I don't really know you and under different circumstances we, at least on my part, could probably be good friends. I just don't agree with your beliefs and the views you take on the forum. You are correct that I don't agree with the way the rules are either slanted or blatantly written in favor of the oil companies. I realize we are fortunate to even have mineral rights at all; but, since we do, I want to protect my mineral rights and along the way if I can help others protect theirs I consider it a privilege to do so.
Yes, you are correct in that I would guess I have the right to pull together enough money and expertise to drill my own well; but, rather than do that, It is much more fun to kibitzer with you about these issues and a whole lot less expensive.
Have a Merry Christmas!
I appreciate the responses from everyone. It s also nice to see opposing views. This is a great forum. I wish i had found the forum prior to signing a lease. I am curious if EOG is making money (profit) from the half dozen deductions they ve listed. My instinct tells me they are and I can t find anything in the lease agreement that gives them that right. I m going to research that angle further. Again, thanks for all the replies and Merry Christmas to all.
Marcus, Benjamin Franklin could save you the search. A penny saved is a penny earned. If an expense can be passed to a mineral owner, it will profit or at least lessen the loss the operator will experience.
The other thing is that although the deductions of expenses necessary to sell or increase the sale price of gas are not mentioned in an oil and gas lease, the courts seem to have already ruled that the mineral owner may be charged for them unless there is language specifically added to the lease prohibiting that the operator can do so.
And then what if the operator refuses to accept that language in the lease and won't sign?
Susan:
I'm not sure I really understand your question; but, if the operator, meaning the lessee, refuses to accept the language you want in your lease, then it's back to the drawing board. First, the Lessee doesn't sign the lease. They just accept or reject. If they accept, you get a few dollars, and more than likely, a lot of headaches and maybe a few more dollars, if they can't expense you to death. If they reject, then you have to make a decision. Is it worth it or not. As Mr. Kennedy said earlier, you have to make some choices, trade something for something else or let them walk. Remember, this ain't a perfect world, so sometimes we have to make some tough choices. That's why everyone needs someone to help develop or clean up a lease prior to ever signing.
Susan,
Negotiate,
First, understand what you are signing.
2nd, Go to a good oil & Gas Attorney and tell him what you want, he's not a mind reader. Research what you want, don't know the terms, google oil and gas dictionaries, oil terms, etc. Computers have made live easy.
If you don't think you can negotiate with an oil company, have the attorney do it for you. I have seen attorney's get more bonuses and better leases.
Most oil companies will try to work with you, so it's a two way street, you want, they want, so meet in the middle of the road.
If you got took, learn from you mistake and don't do it again.
To Mike,
I am sorry that you thought I was talking about all oil companies. I have worked with lots of good oil company that are big and small. My uncle used to owner a drilling company in Cushing, OK, and he worked very hard.
It's sad that a few bad company makes it so hard for the good companies.
To Marcus,
You asked what I did, I'm a retired housewife. My husband does the cooking now. It's a great life.
Hope everyone has a Very Merry Christmas & Happy New Year.
Well, there is a very competent attorney handling the lease. Even Buddy Cotton said this was hard to get around the enhancing issue - and if I refuse to sign the lease, then they get my oil anyway, I get my royalty, they fee me to death, and I don't get my leasing bonus. Right?
Susan,
Their are some things that are hard to control. I'm sure Buddy has worked lots of different leases and could write a book, I think he's been on both sides of the fence.
Here is a statute of limitation in TX that may interest you.
Some states have rules that are hard to work around.
Discovery Rule Article (00078659).PDF, 150 KB
Virgina:
Thanks for this link. I've seen most of this before; but, this is a more comprehensive summary of these cases and it gives us a good idea of the challenges we face when dealing with these guys. Basically, if one decides to read through all this maze of game playing, it doesn't take long to realize that a royalty owner, especially a small royalty owner is in a great big "dog" fight with a very short stick. Whatever the case, everyone needs to read the Wagner & Brown v. Horwood, case which starts on page 5 and then go to page 19 and read the summary statement that dictates what the royalty owner is responsible for doing, knowing and understanding.
After you read page 19, take a deep breath and just think about your responsibilities for a moment.
Happy reading and now go get a dose of Malox!
Ms. Nolen, it could happen exactly as you suggest, they could get your oil anyway, you might not even get a royalty depending on the situation, your royalty could be fee'd to death and you wouldn't get a leasing bonus if you didn't lease. There are alot of factors, none of which you have told us that are important to understand such as how many acres you have, where are they in relation to the acres to be pooled? Are you drillsite/wellbore tract? Do you even know? Do they really need your acres for this unit or do they just want to include them so they can hold more acreage to make it easier if they want to add another well? All the bad things you talked about could come to pass and people are told about them all the time, the stick if you don't accept the carrot. The reason that your oil could be taken at no benefit to you is to protect the correlative rights of others, that there would not be a well without your acres, but that isn't necessarily so and I think it's extremely likely that you haven't checked to see whether it is so or not. They may not have to have your acres to make a well. They may just want to include your acres. When it comes to the stick, just telling me you have one isn't enough for me, I will check to see if it's long enough to reach me. They may actually need your acres and the stick could be very applicable in your case but, have you checked to make sure it is?